Markets Feel January Lows Will Soon Be Tested

Futures are up slightly after yesterday's 90 percent downside day. The problem with yesterday is that it clearly reinforced the notion that we are still in a downtrend; many now expect the January lows to be tested. The Dow is down nearly 500 points in the last two trading sessions.

Elsewhere:

1) I said yesterday an offer was imminentfrom BHP for Rio Tinto ,and it did come. Unfortunately, BHP offered only 13 percent more than their initial offer; this was well below the 20 to 30 percent improvement many felt was necessary to make the offer a "can't refuse" proposal.

Aluminum Corp of China and Alcoa , which own 9 percent of Rio Tinto, are the question marks. They have the Chinese government in the form of funding from China Development Bank behind them, and it is clear China does not want the power that a combined BHP-Rio deal would represent. China is a net importer of iron ore, remember, and they don't want so much control in one company.

Another wrinkle: there is now talk that Japan's anti-trust watchdog may also oppose the deal and has begun talks with its European counterparts to stop the deal.

3) Kelloghas reaffirmed their full year earnings guidance. Kellogg, along with many food companies, have complained about the greatly increased costs of grain and other commodities; they noted that they have hedged approximately 70 percent of its commodity exposure.